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Feed Your 401(k)

Even recent hires have run out of excuses for ignoring retirement.

There's just no excuse for ignoring your retirement, and now there are even fewer excuses for failing to contribute to a retirement savings account at work.

A recent survey by the Profit Sharing/401(k) Council of America discovered that it's getting easier, particularly for young workers and new hires, to save money for retirement.

The organization found that the number of companies allowing workers contribute to a 401(k) plan beginning within three months of their hiring date has gone up to 69%. That's a leap from 65% a year earlier. If you work for a big company (1,000 or more employees), your chances get even better. About 85% can make almost immediate contributions to a 401(k) account, up from 79% the year before.

But wait, there's more! Almost half of these companies' 401(k) plans make employees eligible to get the company match within the first three months of employment. That number more than doubles -- to a full 61% -- for workers at large companies.

If your dog ate your benefits paperwork, go get another copy and sign up. A 401(k) allows you to take money straight from your paycheck and hide it away until retirement, a great feature for keeping your hands off your cash.

You'll also be saving that money before paying taxes, allowing earnings to build tax-free until retirement. That's a fantastic benefit, particularly if you expect your tax rate to fall during retirement. If that doesn't suit your style, some employers have started offering a Roth 401(k), which lets you pay the taxman now and ignore him forevermore.

Here's how to seize the opportunity and make the most of your 401(k):

Start contributing as soon as you can. As we've just seen, many workers can get started within the first few months. If you have to wait a bit longer, find out when you'll become eligible to make contributions. Then mark your calendar, program your scheduler, post a note on your dog -- do whatever it takes to remind yourself to sign up as soon as you become eligible.

If you can't contribute right away, determine how much you'll eventually want to save, then stash that money away yourself until you become eligible to contribute to the 401(k). Use it to bolster your emergency fund or pay off a credit card. Even better, get started on retirement savings yourself by opening an IRA. You'll be less accustomed to getting that fat paycheck, so when it comes time to start making your retirement contributions, you won't have to make any major or painful adjustments to your lifestyle.

Contribute at least enough to get the employer's matching contribution, often equal to 3% of your salary. The catch is that in most cases, they won't contribute unless you're saving. If you don't contribute at least that much, you're ignoring free money. If you can't get the company match right away, start saving that amount anyway.

Make the most of your investments by leaving the money in the account once it's there. Many plans allow workers to take loans from their 401(k)s, and it's a good idea to become familiar with your plan and its terms. But, it's rarely a good idea to take a loan. Let the money earn money until you're ready to leave the working world forever.

Examine your investment options. You'll probably have a choice of mutual funds, chosen by the company or plan administrator. If you're uncertain where to start, look for a low-cost equity index fund akin to the Vanguard 500 Index Fund, which tracks the performance of the S&P 500.

The best part about a 401(k)? Once you set it up, the savings happens automatically. You don't have to remember to fund the account or purchase your investments. Make sure to check in on its performance, and let it pave a path to your retirement.

Rule Your Retirement can help you figure out the best way to plan for your golden days. Advisor Robert Brokamp provides help and guidance no matter where you are in your retirement planning. You can try the newsletter for free by just taking a free trial. There's never an obligation to buy.